State told Peter MacCallum hospital not to cut $250,000 deal with Kathy Jackson

Australia’s pre-eminent cancer hospital was advised by a state government department not to proceed with a deal that included a $250,000 payment to Kathy Jackson’s Health Services Union.

It comes after The Sunday Age revealed that the board of the Peter MacCallum cancer hospital had been separately warned in 2003 not to make the $250,000 payment to settle a back-pay dispute or risk serious criminal sanction under the Crimes Act for paying a secret commission, or bribe.

Despite the departmental advice, the hospital agreed to make the $250,000 payment to the HSU. Photo: Jason South

The letter from the Department of Human Services in August 2003, to Peter MacCallum, details the measures that the hospital was proposing to settle the dispute with the HSU No.3 branch including a new workplace agreement and the $250,000 payment.

The letter from a senior executive in the department, Lance Wallace, said it ‘‘cannot support the original proposal’’ from the hospital.

Mr Wallace’s ''confidential and urgent'' letter, released to the royal commission into union corruption, said it believes it would be in Peter MacCallum’s ‘‘best interest’’ to achieve an outcome ‘‘that secures its financial and legal exposure to pay back payment recovery action.’’

The department's detailed reasons for the advice are not spelt out in the letter released to the royal commission with much of the content redacted. The same document, released under freedom of information laws to The Age, has been even more heavily redacted.

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Despite the departmental advice, the hospital agreed to make the $250,000 payment to the HSU as part of a deal that resulted in research scientists at Peter MacCallum not receiving $3.16 million in back-pay owed to them.

The scientists had been told they could lose their jobs if they did not give up their rights to back-pay.

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The $250,000 payment to the HSU was later used as seed money for a bank account personally controlled by Ms Jackson. From this account she spent thousands of it on herself including at JB-Hi Fi, David Jones, fashion boutiques and also later gave $50,000 to her former husband.

She has said she had authorisation from her committee of management to spend that money, but no records exist.

While being quizzed extensively at a recent royal commission hearing about her dealings with the hospital, Ms Jackson claimed she had been ambushed and asked for legal representation. As a result the hearing was suspended until later this month.

Crucial to the question of whether a secret commission was paid by the hospital to the union was the intent behind the payment and whether it was disclosed to the scientists, lawyers said.

Ms Jackson at one point in the hearing, confirmed the $250,000 was - as stated in a document - for legal, staff and future costs. But she also claimed it was ‘‘packaged up’’ to appease the hospital board who, she said, did not want to admit paying the union a fine.

Ms Jackson said at the hearing, staff had been told of the $250,000 payment although she conceded that a document they signed – to give up their back-pay rights – makes no mention of the payment to the union.

It is unclear if the $250,000 was disclosed and several research scientists have said they had no recollection of being told of the payment.

The Peter MacCallum hospital has threatened a Supreme Court injunction to prevent The Age from reporting legal advice given to the board in 2003 saying it was legally privileged. The Age, which has obtained a copy of the advice, has had to give an undertaking not to report from it.